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What to Expect

Watch for these developments in the presidential race.

Traditionally, presidential races slip into a relatively quiet July doldrums, before the late-summer party conventions kick the race into a higher gear. That may be less true this year, given the wired 24/7 onslaught of news, opinion and speculation. In any case, here are some developments to look for and factors to consider as the contest moves forward.

Wall Street Links

Bain Capital was just the beginning. Expect the Obama campaign to drive hard at pointing out Romney’s extensive campaign contributions from, and personal associations with, the financial sector. Also, expect such criticisms to largely fall flat.

The Obama campaign’s emphasis on Romney’s history at Bain did not prevent Romney’s poll numbers from rising in late May while the subject was widely discussed. Possibly, the line of attack even worked to Romney’s benefit by highlighting his business experience and spurring counterclaims that President Obama is anti-business.

Public displeasure with the financial sector has run high since the 2008 crisis and accompanying bailouts. Such sentiment fed into the Tea Party movement and was central to the Occupy Wall Street movement. Neither of those movements, however, retains the popular enthusiasm of its early phase. Whereas the Tea Party registered a strong impact on the 2010 elections before losing momentum, Occupy has declined without a clear record of tangible political effects.

Romney has far outpaced Obama in raising campaign funds from donors in financial-services industries. Figures through end-April compiled by the Center for Responsive Politics showed Romney had received $8.1 million in campaign donations from the securities and investment industry, compared to $2.7 million for Obama. A broader measure of contributions from the finance, insurance and real estate sector put Romney at $19.1 million compared to Obama’s $8.4 million.

Such disparities will provide material for the Obama campaign in depicting Romney as close to Wall Street. Yet such portrayals seem to be already accepted by the public and their significance discounted. In a May ABC News/Washington Post poll, a 56-32% majority said Romney would do more than Obama “to advance the economic interests of financial institutions.” The same poll showed Romney edging Obama 47-46% in being trusted to do a better job “handling the economy.”

Regulatory Simmering

Formally, Obama and Romney have vastly different positions on financial regulation. For the president, Dodd-Frank was a signature legislative achievement. For the challenger, Dodd-Frank was a bad package and should be repealed. However, arguments between the two campaigns over the regulatory overhaul are likely to be fairly muted.

There are diverse reasons for this. One is that the subject involves many technicalities that would fail to generate public excitement. A discussion of a uniform fiduciary standard, for example, is unlikely to occur during the presidential debates.

Moreover, delving into Dodd-Frank could require awkward side-stepping for both candidates. Obama would have to parry criticisms that the legislation failed to safeguard against future bailouts of too-big-to-fail institutions. Romney would have to provide some specifics as to what he would put in Dodd-Frank’s place (or else face complaints that he merely wants to return to the pre-crisis status quo).

Possibly, despite such considerations, financial regulation will indeed be a high-profile topic in the presidential race. In that case, the campaigns may seek to gain the upper hand by presenting major new policy proposals. For instance, Obama might call for a broad restoration of Glass-Steagall restrictions; Romney might opt for a “downsize the banks” strategy of limits or fees on asset size, as has been urged by some conservative analysts such as James Pethokoukis of the American Enterprise Institute.

However, both campaigns seem to be betting that financial rulemaking is not a particularly valuable issue for them (besides any concern that presenting detailed plans would limit future presidential freedom of action in the event of electoral victory). As campaign season heats up, don’t expect to hear very much about financial regs.

Elizabeth Who?

The Obama campaign is likely to forego a high-visibility association with Elizabeth Warren’s campaign for a U.S. Senate seat from Massachusetts. Warren’s potential to energize the liberal Democratic base initially would have been attractive to the Obama camp. However, controversy over her past identification as a Native American diminishes the upside of featuring Warren prominently for the president’s campaign.

The Romney campaign, too, might be reluctant to engage on Warren-related matters, as Massachusetts seems to rank low in the former governor’s strategy, both as a place to devote campaign efforts this year and as an area of his record on which to focus.

The Norquist Factor

Conservative activist Grover Norquist, head of Americans for Tax Reform, has had broad success in getting Republican politicians to sign his group’s pledge to oppose any tax hikes (including any closing of loopholes not matched by tax rate reductions). Mitt Romney signed the pledge, as did all the other GOP primary hopefuls except Jon Huntsman. Almost all Republicans in the House, and most in the Senate, have signed it.

The pledge has received some resistance recently, with small but growing numbers of GOP legislative candidates declining to sign it, and former Florida Gov. Jeb Bush dismissing it as a way to “outsource your principles.” Moreover, Norquist may have overreached with statements in recent months suggesting the next GOP president would not set an agenda but rather passively sign bills pushed by the Republican caucus.

Expect Romney to distance himself from Norquist to bolster his appeal to the center. Given Romney’s cautious style, this probably will not involve an overt break (or “Sister Souljah moment” as such repudiations have been known since Bill Clinton criticized a controversial activist in 1992). Rather, look for proxy criticisms of Norquist by Romney supporters; Jeb Bush’s statement may have been a trial run for this effort.

Ohio Showdown

The Obama and Romney campaigns are both sure to pour resources into the swing state of Ohio. For Romney, winning the election would be extremely difficult without Ohio’s 18 electoral votes. Ohio’s electoral importance is a factor in growing speculation that Sen. Rob Portman, the state’s junior senator, will be Romney’s running mate. In early June, the Intrade prediction market ranked Portman the top contender for the veep slot, giving him a 27% chance, while Florida Sen. Marco Rubio came in second at 22%.

Expect the Obama campaign to emphasize signs of economic recovery in Ohio, such as the state’s unemployment rate dropping from highs over 10% in mid-2010 to the 7.5% range this year. Expect the Romney camp to riposte that most of that drop occurred after Republican Gov. John Kasich took office in January 2011.

The Key Number

The national unemployment rate, which ticked up to 8.2% in May, will be an extremely closely watched number over the course of the presidential campaign. The October figure will be released on Nov. 2, the Friday before the Tuesday that is Election Day. If that number is 8% or above, and especially if it moves upward, expect the Obama campaign to spend those last few days emphasizing other issues. If that number is below 8%, and especially if it moves downward, expect the Romney campaign to do the same.

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